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Premium pay nets city workers millions in bonuses for just doing their jobs 

Wednesday, Jan 26 2011

If you live east of Twin Peaks, the contents of your toilet have probably passed through the custody of Andrew Clark. He works as a senior stationary engineer at the Southeast Water Pollution Control Plant, the city's largest sewage-treatment facility. It's a job in which he takes pride, toiling amid the fumes of sodium hypochlorite and human waste so that the rest of us — "on the outside," in sewage-plant argot — can enjoy the hygienic living conditions we expect. "Because of what we're doing, our clients — people on the outside — aren't getting sick," the stocky, silver-haired engineer says.

Clark's job isn't easy, but it pays pretty well: about $99,000 a year including overtime. Add to that the retirement and health benefits typical of the public sector, and you're looking at a decent employment package. But there's another source of income into which Clark can tap, which boosts his annual pay into six figures. It's a bonus, albeit one of a sort that might be unfamiliar to workers in the private sector.

Clark receives an additional 7.5 percent of his salary for holding certifications for special skills, such as hazardous-materials management or training from the Federal Emergency Management Agency (FEMA) in disaster preparedness. What's odd is that such licenses are a normal part — actually, a necessary part — of his job. All wastewater operations staff are required by the San Francisco Public Utilities Commission to receive FEMA training, as well as certification in the federal Hazardous Waste Operations and Emergency Response standards.

Compensation of this sort is called premium pay, and it amounts to a lot of money in San Francisco. Last year, as the city faced a $575 million budget deficit, public employees earned a combined $66.4 million in premium bonuses on top of regular pay and overtime, according to records obtained from the Office of the Controller by SF Weekly. In fiscal year 2009, the figure was $70.6 million. The extra pay is given to public employees based on the type, rather than the amount, of work performed.

In some cases, they don't actually have to work at all. In fiscal 2010, the top 10 earners of premium pay in city government all received bonuses — in individual amounts ranging from $43,000 to $65,000 — for "standby" hours, in which they were away from the job but subject to recall if needed. City departments pay employees as much as half of their normal wages for such hours, and up to 1.5 times their normal pay when called back. (The above dollar figures include both types of compensation; city records on standby pay do not distinguish between them.)

Some kinds of premium pay are more easily justifiable than others. Nurses in the Department of Public Health, for instance, are awarded a bonus for working undesirable shifts on nights and weekends; the payment is intended as an incentive to make sure hospital wards are staffed around the clock. It can be argued that particularly hazardous or dangerous work also warrants a cash incentive. But other premiums seem redundant with basic job requirements and raise questions about government waste in a time of economic crisis.

Firefighters, for example, earn premiums for driving fire engines, despite the fact that every employee of the San Francisco Fire Department is trained to do so. They also earn premium pay for time spent working as emergency medical technicians, even though holding EMT certification is a condition of their employment. Members of the Teamsters receive premium pay whenever they're behind the wheel of one of no fewer than 20 different types of "specialty" vehicles, including tractor-trailers, street sweepers, and storm-drain cleaners.

In what many acknowledge as one of the more puzzling varieties of premium pay, city clerical workers until 2007 received a bonus for proficiency in computer word-processing software. A word-processing premium is still paid to some employees of the San Francisco Superior Court, which is funded by the state of California.

Despite the substantial burden premium pay represents for San Francisco, it has not been the object of public scrutiny, even as other forms of extra compensation, such as overtime, have come under fire. Last year, the city's overtime expenses totaled $123.8 million; premium pay still costs more than half as much.

But premium pay has started to draw attention, as some call for a reassessment of the bonuses in light of the city's financial straits. Halfway through the 2011 fiscal year, which began at the end of June, the city had already paid out $29.5 million in premium pay. Meanwhile, bus routes and community centers were shut down to help offset another half-billion-dollar budget deficit.

In September, the Board of Supervisors' Budget and Legislative Analyst's office proposed a sweeping audit of premium pay, examining how it has grown over time, its impact on pension costs, and whether the city's premium-pay practices are in line with those of other municipalities. Supervisors authorized the office to proceed with an audit, in modified form, last month. The report is expected to be released this spring.

"Some of [the premiums], it's just not warranted," Severin Campbell, audit manager for the Budget and Legislative Analyst, tells SF Weekly. "We think it's gotten pretty distorted in the city, and it also allows room for people to game the system."

Campbell, who has wavy brown hair and a gentle voice appropriate to her former profession — she used to be a nurse and union representative — appeared before the Board of Supervisors' Government Audit and Oversight Committee on Sept. 23. On the agenda was a list of potential audits on a range of topics, including policies for permitting advertising on public property and the success of Healthy San Francisco, the city's landmark health care-access law. But it was one item — a proposed audit of premium pay — that took up most of the discussion.

"I think it's a very important topic," Campbell told the committee. "There's very much that's happened in the structure of various pay practices in the city that I believe the Board needs to look at and address."

Supervisor Carmen Chu, who sat on the committee at the time with Eric Mar and then-Supervisor Sophie Maxwell, interjected. "Just a question," Chu said. "With regard to the premium pay practices, what exactly do you mean by that?"

The comment said a lot about public awareness of the issue. As cities and states across the country have convulsed with the economic downturn that began in 2007, the subject of public employees' wages and benefits — one of the largest drains on tax dollars at every level of government — has gotten a lot of attention. At the local level, the debate over city workers' compensation crested with Proposition B, a municipal ballot initiative that would have modestly increased employees' contributions to their own health care and retirement plans. It was not supported by a single elected official in San Francisco with the exception of Public Defender Jeff Adachi, its author, and went down to defeat in November by a whopping 16-point margin.

Yet premium pay, despite the tens of millions it costs the city every year, has never inspired heated debate. One reason is that premiums are an obscure provision of labor contracts. When city negotiators announce, for instance, that workers in a given union will receive a 3 percent raise, that number doesn't include premium payments. Unions themselves have little to gain from advertising the extent of the bonuses they enjoy, and their cost isn't tallied in any kind of format that's easily accessible.

Another reason is that premium pay is an unusually complex subject. Unlike the obvious advantages many government workers enjoy over their private-sector counterparts when it comes to benefits or even wages — the San Francisco Chronicle reported in April that one in three city employees earns a six-figure salary — premium pay doesn't lend itself to pat vilifications of the public sector.

Some premiums appear justified, others don't. The problem is that the city seems to have lost track of which are which.

"To draw an absolute line, I think, would be irresponsible," Supervisor Sean Elsbernd, the board's foremost budget hawk, says of premium pay. "Are there inefficiencies? I have no doubt."

Gabriel Metcalf, executive director of the San Francisco Planning and Urban Research Association, a nonprofit, nonpartisan urban-studies think tank, says the opacity of the question is all the more reason for taking a close look at it. "From a good government perspective, the main problem with abusing premium pay is that it prevents transparency. It means that the citizens cannot understand in a straightforward way what civil servants are being paid," he says. "There are some cases where premium pay is justified — if you need to get someone to work a graveyard shift or something like that. But it's clear that it's being abused now."

San Francisco's politics is heavily influenced by the interests of organized labor, and given unions' heft at City Hall, it comes as little surprise that the Board of Supervisors has been loath to delve into premium pay. Campbell faced an uphill battle before the Government Audit and Oversight Committee. In one of several meetings, some members appeared to suggest that the purpose of the proposed audit should be to create more premiums for city employees, rather than scaling back the ones that already exist.

"If one bargaining unit gets good incentives and flexibility [with its premiums], perhaps that could be extended to other bargaining units," Mar said.

"If the goal is to incentivize or to make things better, I'm all for that," said Maxwell, a former electrician. However, she added that she had a "concern" about the audit "if the goal is to find out who's doing something wrong."

In the end, the supervisors approved an audit that, Campbell tells SF Weekly, is "much narrower" than what was originally suggested. Auditors will now focus exclusively on two types of premium pay suspected of being particularly prone to abuse — standby pay and lead pay, a leadership bonus that workers can earn for working in groups of their peers that are as small as two people — the "leader" and someone else. With the notable exception of police officers' standby pay, however, neither of these is among the largest sources of premium pay for city employees.

In other words, the audit approved by supervisors will probably not address the most fundamental questions about premium pay — why it exists, whether it's fair, and how much it has grown over time. Yet a review of premium-pay figures obtained by SF Weekly, as well as of archived union contracts dating back to the beginning of the city's current negotiating process in 1993, points toward some interesting — and unexpected — answers to those questions. It turns out that these lucrative bonuses have a more idiosyncratic history than you'd think.

The first thing that's clear from a review of the city's bonus figures is that not all workers benefit to the same extent. Some departments and unions have agreed on more and higher premium payments than others. Near the top of the list are the police department, which logged $15.5 million in premiums during fiscal 2010, and the Department of Public Health, with $8.5 million. Most police premium pay comes from standby time or off-hour shifts, while much of the Public Health money comes in the form of standby pay for nurses and doctors, as well as a 5 percent premium for "charge" nurses who temporarily assume leadership of a ward.

Yet it is the fire department, more than any other city agency, that stands out for the number and size of its premium payments. In 2010, firefighters earned $20.4 million in bonuses — more than 30 percent of the premiums paid out in the city, though they make up only 5 percent of San Francisco's 27,000-strong government workforce. Eight of the top 10 most costly forms of premium pay are those involving the fire department.

These are not, as you might expect, bonuses for working under hazardous conditions. The single largest category of premium pay in San Francisco is the fire department's training and education incentive, which grants an extra 6 percent of an employee's salary to anyone who has an associate's or bachelor's degree in fire-suppression science or a "related field." But you don't need to go to school to be eligible; anyone who has been with the department for at least 10 years also gets the bonus. In 2010, it accounted for $8.9 million.

Other forms of premium pay are also widely available to firefighters. Premium payments to those who worked as EMTs totaled $1.2 million last year, even though all San Francisco firefighters have been required to hold EMT certification for 20 years. Engine drivers also receive a premium, and these payments added up to $1.7 million in 2010. (Both premiums are calculated by tacking on 5 percent of a person's salary.) By contrast, what many would consider a more reasonable premium for firefighters — a bonus for those who work with hazardous materials as a regular part of their jobs — added up to a comparably small $270,000 over the same period.

Tom O'Connor, president of the city firefighters' union, defends the premiums, arguing that they are rewards for higher levels of training or more difficult and risky kinds of work. For instance, he says firefighters who work as EMTs on a given day expose themselves to greater liability if they make mistakes. Losing an EMT license because of missteps on the job would also mean suspension, since holding the license is a condition of employment. The other firefighters in a squad don't run that risk when they're not the designated EMT, he says.

O'Connor asserts that the idea of a premium for EMTs was originally introduced by the city long ago as a cost-saving mechanism. He says that by paying a premium, the fire department avoids having to establish a separate, higher-paid rank for firefighter EMTs, thus saving itself money in long-term pension and health care costs. "I understand the city is looking for every nickel and dime under the couch cushion," he says. However, "it's funny that they criticize it, because probably nine times out of ten they came up with the premium." (Despite his description of the premium's origins, O'Connor acknowledged that city negotiators now "constantly try to get rid of" the EMT payment, arguing that it is redundant with firefighter job requirements.)

Monica Fields, the fire department's deputy chief of administration, likewise defends the premium payments received by her employees. The engine-driving premium — officially called "apparatus operator assignment pay" — is recompense for a position of greater responsibility, she says, since drivers are tasked not only with steering an engine to a fire but also ensuring that the proper amount of water flows from the engine to the scene once there. "You really are the lifeblood of [an] incident," she says. "Although a good majority — actually, all firefighters — are trained to operate a fire truck, above the role of firefighter, I think it's even more important than that."

Fields believes the premiums are fair. She also remembers a time when they did not exist. When she entered the department in 1989, there was no premium for working as an EMT. Nor was there a premium for driving the fire engine, as she recalls, though she admits she wasn't paying close attention to which bonuses were on offer. "I was a junior firefighter," she says. "I was learning how to do my job. I wasn't thinking about premium pay. I was just happy to have a job."

Where did the current $70 million in premium payments come from? Jim Lazarus, who is now senior vice president at the San Francisco Chamber of Commerce, worked as a deputy city attorney and private lawyer advising the city on labor relations in the 1970s and 1980s. According to Lazarus, many premium payments emerged as a result of the idiosyncrasies in the city's old way of negotiating union contracts.

Collective bargaining — the most common form of negotiation between unions and workplace managers — did not begin in San Francisco until the early 1990s. Before that, the city used various methods of calculating government workers' wages. In the late 1970s, Lazarus says, the city used a particularly rigid formula to set its employees' salaries, based on a survey of compensation in other municipalities. In years when the formula dictated that wages remain static, bargaining focused on benefits — and bonuses.

For instance, during a wage freeze for plumbers in the 1970s, Lazarus says, the city placated its union by creating a premium payment many plumbers were likely to receive — a bonus for working around sewage. This "excrement increment," as it was known, functioned as a back-door raise.

"Now, every plumber doesn't work around raw sewage every hour, so there's some justification for it," he says. "But it was really to get around a wage freeze in the formula." Today, some unionized trade workers still receive a premium for working around sewage.

When it comes to odd categories of pay, there's no end to the quirky bonuses that can be found in the city's 32 contracts with various unions. Mechanics get a $1.20 per hour premium for repairing tires, and an extra $1.25 per hour for repairing fire-truck tires. Painters get an additional 75 cents per hour while applying epoxy, and 50 cents per hour while using sandblasting equipment.

"Some of these things are just layered from an older bargaining history, when we bargained that stuff because we had nothing else to bargain," Lazarus says. "We do all these things for cutting back overtime. That's kind of been the public focus, without looking behind all these work-condition payments ... it's just layer upon layer, and it really needs to be looked at."

The persistence of odd bonuses, in and of itself, is less of a financial drain on the city than the ways in which some of the most common forms of premium pay have grown more costly. (The Superior Court's word-processing premium accounted for only $1,856 in pay in 2010, according to court spokeswoman Ann Donlan.) Since the advent of collective bargaining, unions have succeeded in enlarging their members' returns on existing premium payments. For instance, they have negotiated to have many premiums changed from a flat dollar payment to a percentage of an employee's salary, allowing the bonuses to gradually increase as their recipients get raises.

The fire department's education and training premium is a good example. For years, the premium applied only to those with a degree in fire science, and comprised a biweekly payment of a specific amount. According to a 1999 report by the Board of Supervisors' budget analyst, only 8 percent of department employees were eligible, and the payment amounted to less than 1 percent of their salaries.

The same year, however, the premium was extended to those with 10 years of time in the department, putting it within reach of 70 percent of firefighters. It was simultaneously changed to the current 6 percent of a recipient's salary. As a result, its cost to the city skyrocketed.

While it accounts for a significant portion of the city's labor costs, premium pay isn't unique to San Francisco or even to the public sector. Dan Mitchell, a professor emeritus of public policy and management at UCLA, says that work-condition bonuses are common in union contracts, even with private employers. Railroad companies used to pay their technicians a premium for carrying walkie-talkies, Mitchell says, in the days when the devices were large and heavy.

Even those in management defend some premium payments, arguing that they serve a straightforward purpose. Standby pay, while perhaps unfamiliar to many who work for nongovernment employers, is a standard practice at private organizations — like hospitals — that provide public services. For such organizations, the need to ensure that doctors, cops, firefighters, or utility workers are available around the clock carries significantly higher stakes than for a restaurant or newspaper. Special pay for graveyard shifts and weekends serves the same purpose.

"You have to have it in order to be able to staff these [undesirable] shifts. People just won't do it without it," Jean Ann Seago, a former Kaiser Permanente manager who now teaches at the UCSF School of Nursing, says of the various pay premiums for night and weekend shifts. "There are places without unions I've worked. They still have [premium pay], it's just not as good. ... Hospitals are 24/7, and nurses are the ones who have to be there."

Mitchell says the important question is whether, when premiums are included in an employee's wages, the resulting salary is fair. "Regardless of what the components are," he says, "what does the total look like?"

This is the question that has bedeviled analysts of cities' pay practices, both bonuses and salaries. Some jobs have no easy point of comparison in the private sector. Sylvia Allegretto, an economist at UC Berkeley, says her research shows that public employees are actually underpaid compared to their private counterparts, though they have better benefits. But she says the comparison breaks down for some workers, such as those in public-safety jobs.

"The idea of pay is really tricky. We don't really have firemen in the private sector, so we can't do a one-on-one comparison," she says. "What is responsible pay for a firefighter? You couldn't pay me enough to work as a policeman in Oakland."

Many would probably say the same thing about Ray Jackson's job. Jackson, a large man with brown eyes and a few days' growth of beard, is a plumber employed at the same sewage-treatment facility in the Bayview where Andrew Clark works. He makes a good living — $90,000 a year in base wages, which comes to $95,000 when other forms of compensation, including premiums, are added in. That's well above San Francisco's median household income of $73,000, which is itself $12,000 above the statewide average.

Then again, Jackson's job is different from those of most people. He repairs pipes that conduct the flow of human excrement in enclosed rooms where the odors of sewage compete with those of noxious chemicals. The odor is so bad that he wears a full-face respirator that resembles the gas masks worn by biohazard responders.

Even the mask and his gloves don't always keep the germs out. Despite his efforts not to touch his face or lick his lips while on the job — condensation from the steaming sewage pipes can settle on a person's skin — Jackson has contracted both work-related pneumonia and a staph infection during his time at the Southeast plant. "Every now and then, you'll get diarrhea for no reason," he says.

On a recent weekday morning, he clambers over an iron grating that stretches above a viscous, tar-colored pit of sludge. Corroded pipes dip from the low ceiling, and the hum of conveyor belts and centrifuges — separating solid from liquid before wastewater is expelled into the bay —creates a heavy, constant din.

"I do like working here," he says, although he worries "about bringing anything home to my wife and my kids and my grandkids." When Jackson's granddaughter was born in December, he traveled straight to the hospital from work but was unable to hold her because of the risk of infecting the newborn with sewer-borne bacteria.

"It's sort of like The Time Machine," says Larry Spillane, the plant's maintenance superintendent, referring to H.G. Wells' 1895 story of a futuristic society in which a subhuman species, the Morlocks, toils beneath the ground to create a paradise blithely enjoyed by another group, the Eloi. "Sometimes we feel like we're the Morlocks, under the city keeping things ticking, so people can flush their toilets."

The debate over public employees' compensation has tended to cast its characters as either Eloi or Morlocks, as one privileged class versus another group that's being had. (By the way, Wells' fictional time traveler eventually discovers that the Morlocks are exploiting the Eloi by raising them for slaughter, like cattle.) Some think that it is government workers who are benefiting on the backs of taxpayers wounded in the recession, while others argue that criticisms of unions are an assault on the hard-working people who make a city run.

Premium pay is rightly treated as a topic separate from this argument. It's not about whether public employees work hard. It's about a substantial program of cash entitlements that in many ways no longer seems fair.

Take Jackson. The interesting thing about his situation is that for working in conditions from which most people would recoil, he receives a relatively minuscule "premium" — just $3 a day is doled out through the city's "wastewater treatment facility assignment" bonus. A much bigger source of income for him is something that every city-paid plumber gets, no matter how pleasant or unpleasant their jobs are: a 3 percent premium for possessing a certificate in backflow prevention. Everyone has the certificate, and everyone gets the bonus.

In other words, San Francisco's system of premium pay offers Jackson a paltry reward for the travails of unusually demanding work, while paying him a hefty bonus for a certification held by every other plumber in the city. That's not to mention the 7.5 percent bonus that goes to Clark, his boss, or the millions a year delivered to fire-engine-driving firefighters. For anyone convinced of both the dignity of labor and fairness in compensation — that old liberal principle of equal pay for equal work — it's hard to conclude that the current way of doing things makes sense.

View a graph showing the 2010 total premium pay by city agencies.

About The Author

Peter Jamison


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